The 2017 Tax Cuts and Jobs Act (TCJA) updated the net operating loss rules to eliminate carryback opportunities while allowing carryforwards to be used to offset 80% of taxable income. On the plus side, the updated rules allowed losses to be deferred indefinitely removing the 20 year expiration rule and even better than that, is the good news that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has modified those rules even further and now the 80% limitation has been lifted, meaning once again losses can now be carried back for up to five years.
The widening of the use of net operating losses and allowing carryback refunds as part of implementing the CARES Act presents an opportunity for small businesses to recoup taxes paid, as well as significantly reduce their tax burdens going forward. The IRS also announced temporary procedures that allow a fax transmission of the required forms to speed up the processing times for these refund claims. The new law requires a taxpayer with a net operating loss arising in a 2018, 2019, or 2020 taxable year to carry that loss back to each of the five preceding years unless the taxpayer elects to waive or reduce the carryback.
Starting on April 17, 2020 and until further notice the IRS will accept eligible refund claims forms to a specific fax number – 844-249-6236 for Form 1139 (corporations) and 844-249-6237 for Form 1045 (individuals, estates and trusts). The IRS is encouraging taxpayers to wait until April 17, rather than mailing in the forms since mail processing is being impacted by the pandemic.
Previously, these forms could be filed only via hard copy delivered through the USPS or by a private delivery service. The temporary procedure to accept these forms via fax allows the federal government to make the relief in the CARES Act available to taxpayers before IRS processing centers are able to reopen. The other procedures to process claims will remain the same – the only difference is to allow an additional method to file eligible refund claims.
The Czar Beer team is dedicated to providing timely, accurate information on all aspects of the CARES Act and the current economic crisis that affect our clients. However, as this is all developing quickly we are here to offer support in any way we can. You can email us at firstname.lastname@example.org or call 212 397 2970 with any questions you may have.